Chancellor is sitting on a mountain of debt

Simon Heffer

Last updated at 16:51 27 April 2004

Were it not for the Hutton Inquiry there is no doubt what would be making the headlines today.

It would be the increasingly precarious state of the public finances, the growing mountain of public and private debt, its inflationary effects, and the measures the Chancellor is likely to be forced to take to salvage matters.

Gordon Brown has kept quiet during Tony Blair's miserable summer. It is typical of the Chancellor, who favours invisibility when crises are about.

However, this time it may be more than just a desire not to be associated with the most disastrous episode yet in New Labour's history that has muffled Mr Brown.

Public borrowing is set to exceed projections by up to £40billion in the next three years. By the possible time of a General Election in mid-2005 public spending is expected to rise from its present level of £455billion to more than £511billion, a rate of increase way above inflation and growth combined.

On top of this profligacy, Labour must face the fact that British business's love affair with the party is well and truly over.

Tomorrow Mr Blair will meet some of the country's top chief executives who have been happy to reveal in advance their list of grievances with a Government that many of them cosied up to five or six years ago.

There is a threat by several big businesses to move abroad unless Labour improves the climate for enterprise, including lower corporate and personal taxes, and the removal of red tape.

But tax cutting is not remotely likely because Labour's spending promises simply do not make it possible. Where the Chancellor has gravely miscalculated is in his earlier statements that growth would provide the additional revenues to meet these commitments. It isn't doing so, and it won't.

Our determination to lock ourselves in economically with Europe has aggravated a situation made bad by Brown's reckless spending.

France has 3million unemployed, Germany 5million.

President Chirac and Chancellor Schroeder are attempting what they euphemistically call economic reforms to improve matters.

What they in fact have in mind is busting the terms of the European currency stability pact, which could have dire consequences for the whole European economic set-up as they, too, sink deeper into debt in an attempt to spend their way out of stagnation.

With Britain not in the euro, and able to please herself in most matters of economic management, the Chancellor should be able to stop us going the way of our ailing European partners.

However, this would rely on him taking steps that would upset either his friends in the trades unions, or the wider British public, or probably both.

As things stand, his policies are storing up a future of higher inflation, higher interest rates and rising unemployment, and greatly restricted growth and prosperity.

The Chief Secretary to the Treasury, Paul Boateng, has already warned Ministers that the next spending round will be the tightest for years. He has made it clear that some departments will have to cut spending.

However, the Health Service is to be protected from this, and there is no mention yet of serious cuts in the area where spending has ballooned since Labour took office, the local government budget.

The proposed cuts about which Mr Boateng has warned are two or three years down the line, and have yet to be agreed. The shortfall must be made good before then, which means higher taxes for businesses and individuals irrespective of any cuts.

Yet we know prosperity cannot increase in a high tax economy. Our own experience in the 1980s, and that of other nations since, proves it. Without prosperity Mr Brown will never have the growth he needs to fund his ambitious schemes.

Once the economy is back on the agenda, Labour will have much explaining to do.

In the new post-spin era we are now promised, that must include Mr Brown taking hard decisions to protect the productive sectors of our economy, and the hard- earned wealth of all our people.